The ferrous complex dead cat bounced yesterday which is entirely normal for a grand bear market. Spot launched higher and paper kept running overnight:
Funny stuff typical of a bear market.
Not much to report in wider news. Evergrande will be restructured. It is not the problem. This is NOT over:
- Chinese property demand will keep slowing.
- More steel output cuts are ahead.
- Supply is rising.
- China now has a steel glut and plenty of iron ore to boot.
Unless or until China panics and stimulates, we must fall to the lowest marginal cost producer around $60 to have any chance of stabilising prices.
That said, seasonality will turn bullish in another six weeks or so and that might help a little.
Then again, steel output cuts have done a lot to suppress the raw material inventory cycle so we may just see a rerun of 2015 when prices kept on falling right through the new year.
Either way, in the absence of Chinese panic it’s $60 sooner rather than later.